Luxury brand strategy after the boom: rebuilding desirability without price hikes

Bain and Altagamma’s November 2025 study puts the personal luxury goods market at a forecast €358 billion in 2025, against €369 billion in 2023 and €364 billion in 2024. Across all luxury segments, consumers’ worldwide spending is set to reach €1.44 trillion in 2025. The market has not collapsed, but it has stopped growing after a post-pandemic surge, and the number of buyers behind it has fallen.

The customer data is more telling than the revenue. Bain reports that the number of luxury consumers dropped from 400 million in 2022 to around 340 million in 2025. Active luxury shoppers fell from about 60% of the total addressable customer base in 2022 to some 40–45% in 2025, and between 2024 and 2025 new customer acquisition for luxury brands declined by 5%. The shrinking of the base is the mechanism behind the slowdown.

For a CEO this reframes the problem. A brand that has lost aspirational buyers cannot rebuild by selling more to existing clients indefinitely. Each year of unchanged acquisition makes the franchise older and more dependent on a smaller group. The risk is not a sudden fall but a slow narrowing that only becomes visible when the top client’s spending flattens, as it has begun to do.

Some leaders read the slowdown as macroeconomic and expect a rebound. We would treat that as a hope, not a plan. Bain’s June 2026 update forecasts personal luxury growth of 2%–4% in 2026, which is positive but modest, and its scenarios assign roughly a 70% likelihood to that range. A brand that waits for a cycle to lift it will meanwhile lose ground to those who rebuild demand deliberately.

Measurement choices matter here. Brands that report only revenue growth at constant exchange rates can mask a fall in volume behind price and mix. Reporting the number of transactions, units sold and active clients alongside value gives the board a clearer view of whether growth is real. It also makes the effect of price decisions visible, since a rise in average ticket that is offset by fewer buyers is a warning sign, not a success.

What to do: replace revenue as the lead indicator with client counts. Track active clients by tier, new-client acquisition, lapsed-client reactivation and the share of purchases at full price. Set targets for the base, not just the total, and review them with the executive committee quarterly. A brand that knows how many clients it gained and lost last quarter can see the slowdown before the income statement shows it.

Bain finds that the prices of like-for-like iconic bags have risen by between 50% and 70% from 2019 to 2025. At the same time, top customers now account for a little more than 46% of total luxury goods spending, up from 30% in 2019. In the 2025 press release, Bain and Altagamma put their share at 45% (€165 billion) in 2024, against 30% (€88 billion) in 2019. The two moves are linked.

The effect on aspirational buyers is clear. Bain notes that the high-end tier, some 40% of the market, contracted slightly between 2023 and 2025. When an entry-level item moves out of reach, the aspirational client does not buy a smaller one; often she stops buying or trades into another category, or into pre-owned. The brand then depends more on top clients, who are fewer, more demanding and more exposed to wealth cycles and to competing houses.

Price plans for 2026 suggest the industry is aware of the problem. McKinsey’s State of Fashion 2026 reports that 18% of luxury executives expect price increases above 5%, compared with 26% across fashion overall, in a segment where growth has largely been price-driven in recent years. Restraint is emerging, but it is happening more because of resistance than because of a new strategy. A deliberate policy would pair restraint with other drivers of value.

The implication is that price should be managed as part of the client relationship, not as a lever for the year-end result. Entry points, core icons and top-tier pieces serve different clients and deserve different treatment. Holding the price of the entry points, where the aspirational client joins the house, while using scarcity and craft to justify higher prices at the top, protects the funnel without giving up all pricing power.

The risk for top clients is also commercial. A brand in which a small group of clients provides close to half of spending is exposed to the preferences of that group, and to competitors that court them with greater exclusivity. Retaining them requires access, recognition and the sense that the house values the relationship, rather than additional price signals. Brands that treat the top tier as a source of cash rather than as a community often learn the difference when the group moves on.

What to do: audit the price ladder item by item against the clients who buy at each step. Identify the entry points that have moved furthest out of reach, and decide which to hold, reposition or re-engineer. Test the effect of a pause in increases on client acquisition in one market before extending it, and agree the threshold at which prices will move again.

The financial cost of the shift is large. Bain finds that operating margins fell to between 15% and 16% in 2025, down from 21% in 2022. It estimates that the contraction has led to a loss of around €100 billion in the industry’s total enterprise value. Margins that took a decade to build have been given up in three years, largely because costs, from stores to marketing, were set for a level of demand that did not hold.

The industry average hides divergence. Hermès reported consolidated revenue of €16 billion in 2025, up 9% at constant exchange rates, with recurring operating profitability of 41%, compared to 40.5% in 2024. Kering’s 2025 revenue was €14.7 billion, down 13% as reported and 10% on a comparable basis, and its recurring operating margin was 11.1% in 2025 versus 14.5% in 2024. Gucci revenue fell 19% on a comparable basis.

We draw a limited conclusion from this contrast. The results do not prove that any one pricing policy succeeded or failed; Hermès does not discuss pricing in its release. What they show is that some houses sustained demand at high margins and others did not, and that the difference is a matter of brand strength, product pipeline and client relationships. Margin is a consequence of desirability, and cannot be recovered by cost reduction alone.

The implication is that cost programmes should be designed around what clients value. Cutting store space, marketing and local assortment can protect margin in the short term but risks weakening the experience that supports full-price purchases. Conversely, investing in craft, product development and clienteling raises cost today in return for a return that arrives over several seasons. The CEO’s job is to be explicit about which costs build desirability and which do not.

What to do: classify the cost base into spend that builds desirability, such as design, craft, client service and key locations, and spend that does not. Protect the first group and review the second. Report to the board on the margin effect of both over a three-year horizon, so that the case for reinvestment is made on the same terms as the case for savings.

The category data points to where desirability is strongest. Bain reports that jewellery sales grew by an estimated 4% to 6% at current exchange rates in 2025, reaching an estimated €32 billion, and that eyewear expanded by an estimated 2% to 4% to €17 billion. Beauty, the largest category at a midpoint estimate of €78 billion, held its ground, and apparel at €75 billion was stable. Watches totalled an estimated €52 billion and remained broadly flat.

The weakest categories are those most exposed to price increases. Leather goods declined again in 2025, down an estimated 5% to 7% to about €74 billion, and shoes declined by a similar amount to €24 billion. Leather goods were long the engine of luxury growth, built on icons whose prices rose fastest. The contrast with jewellery, where the product is often unique and bought for occasions, suggests that clients still pay for items that feel rare or personal.

Hermès offers a counterpoint inside leather. Its Leather Goods and Saddlery division grew by 13% in 2025, according to the company’s results. We do not infer a recipe from one house, because Hermès has strengths of scarcity and craft that others cannot copy. But it indicates that the category is not in decline for everyone. Product that feels exceptional, supplied with discipline, continues to sell in the same market in which others struggle.

The implication for the CEO is to invest in creative renewal rather than in extension of the same icons. That includes new silhouettes and materials, limited editions, craft stories and collaborations with a clear point of view. It also includes the courage to retire or rest products that have been over-distributed. A brand with a stable, well-managed range of icons and a flow of genuinely new ideas will give the client both reassurance and a reason to return.

What to do: review the range by contribution to desirability, not only to sales. Identify the five products that carry the brand’s image, those that generate traffic and those that merely add volume. Redirect design and production capacity toward the first two groups, and set a calendar of newness with enough scarcity to create demand. Measure the share of full-price sales in new products against icons.

The 2026 BoF-McKinsey Luxury Client Survey of more than 2,000 clients across spending tiers in the US and China provides evidence that demand has not disappeared. It finds that around 50 percent of those surveyed say they would pay full price for a luxury product. It describes established and aspirational clients as the critical middle, representing around $70-90 billion. These are the clients who most need a reason to buy now.

Their behaviour is shifting rather than vanishing. As much as 59 percent of established luxury clients regularly purchase pre-owned products, and around half of luxury clients who use AI rely on it to explore luxury brands and understand product differences. Clients are researching more, comparing across new and resale, and arriving at the boutique with more information. A brand that expects loyalty by default will meet clients who treat it as one of several options.

There are also signs of renewed capacity at the top. McKinsey’s State of Fashion 2026 reports that the number of ultra-high-net-worth Americans rose 6.5 percent in H1 2025, following a 21 percent surge in 2024, and that UHNW net intent to spend on luxury fashion in 2026 is 34 percent in China versus 27 percent on average in markets. Wealth is being created, and some of it is available to brands that offer a reason to spend.

The implication is that the middle needs to be won by relevance rather than by discount. Clients who would pay full price are telling brands what they value, which is product with a clear identity, the sense of an occasion and a relationship with the house. Brands that provide those things can hold price; brands that rely on a logo and a sale cannot. Resale is not only a threat, since it also introduces new clients to a brand’s product.

Resale deserves a considered response rather than resistance. A client who buys pre-owned today may buy new tomorrow, and a brand that authenticates, certifies or participates in resale retains a view of the product’s second life. The same data tells the brand which pieces hold value, which is evidence of desirability that no survey can provide. Resale values are, in effect, a continuous price test run by the market, and a brand can read them.

What to do: segment the middle by motivation rather than by income, and design offers for each segment. For the established client, create access, previews and personal service. For the aspirational client, create entry products and moments that justify a first purchase at full price. Treat resale and AI search as parts of the client journey, and make sure that the brand’s own channels give accurate and appealing information.

The in-store experience is where desirability is confirmed or lost. Bain notes that 70% of consumers are dissatisfied with the in-store experience, a striking figure for an industry that sells service as part of the product. If new-client acquisition has fallen 5% and active shoppers have declined to some 40–45% of the addressable base, the first contact is a point of high leverage, and most brands have not yet taken advantage of it.

Clienteling is the discipline of building and using knowledge about a client to personalise service. It includes recording preferences and purchases, following up after a visit, inviting clients to events relevant to them and coordinating across stores and channels. Done well, it raises the share of purchases at full price and the frequency of return. It is also relatively inexpensive compared with advertising or store construction, because it uses assets the brand already has: advisors, data and product.

The BoF-McKinsey survey indicates what clients want from moments. Established clients in particular show interest in cultural events, with 50 percent of that group expressing interest in attending. Such events are not primarily promotional; they provide the sense of belonging that makes a luxury purchase feel meaningful. They also give advisors a reason to contact clients without making a sales call, which is the basis of a relationship rather than a transaction.

The implication is that investment in people and data is more productive than another round of price increases. Advisor training, incentives that reward client relationships rather than single sales and clean client data across markets all take time to build. They also reduce the dependence on a small number of top clients, because they widen the group of clients who feel known by the house.

Digital channels should support, not replace, the relationship. Bain’s June 2026 monitor points to growth in digital luxury sales in China, but online sales without a known client add little to desirability. The most effective use of digital tools is to connect advisors with clients: appointment booking, product reservation, remote consultations and after-sales care. Used this way, technology increases the number of meaningful interactions per advisor rather than simply moving transactions to a website.

What to do: set a clienteling standard across the network, with a minimum client record, a follow-up routine and a calendar of client moments. Link advisor incentives to repeat purchases and client retention. Pilot the model in a few flagship stores, measure the effect on full-price sales and repeat visits, and extend it only where the evidence supports it. Review data governance with legal counsel, since personalisation rests on consent.

The outlook calls for disciplined planning. Bain’s June 2026 update expects the personal luxury goods market to grow by 2%–4% in 2026, and assigns about a 70% likelihood to its realistic scenario. It also reports an estimated 15% to 25% drop in the GCC luxury consumer base in the first quarter of 2026. Longer term, Bain and Altagamma project that the personal luxury goods market should reach between €525B and €625B by 2035.

The regional picture shows why one global plan is unlikely to fit. UHNW demand in the United States is rising, intent to spend in China is higher among the wealthiest than elsewhere, and the Gulf is under short-term pressure. Each region has its own mix of local clients, tourists and channels, and its own sensitivity to price. A brand that sets prices and assortments centrally may find it is out of step in several markets at once.

The implication is that the CEO should plan around scenarios and make each initiative earn its place. In a 2% to 4% market, a brand that grows faster does so by winning clients from others, not from the market. That makes the quality of the product, the clientele and the experience the determinants of growth. Cost and capital should follow those, with room to move quickly if the market moves to the better or worse scenario.

A last point concerns timing. Rebuilding desirability takes seasons, not quarters, and the first signs will appear in client metrics before revenue. Boards should therefore expect a period in which acquisition and full-price share improve while reported growth remains modest. Setting that expectation in advance prevents the temptation to return to price increases when the first quarter after the change looks undramatic.

What to do: agree three scenarios for the next 24 months with the board, covering the worse, realistic and better cases, and define the triggers for moving between them. Set regional plans that allow local variation in price, assortment and events within a global brand frame. Review the plan every quarter, using client metrics as leading indicators and revenue as confirmation.

Karter McKinley supports luxury and premium brand leaders with strategy and transformation: client and category diagnostics, price-ladder and range review, clienteling and operating model design, and the programme management needed to deliver them. We work with the brand’s own teams and specialist partners, and each engagement is scoped separately.